Public Policy Archive

Boston Bar Endorses Passage of Bankruptcy Venue Reform Bill

Monday, October 24, 2011

Emphasizing that those affected by a court proceeding should have convenient access to the proceeding, Boston Bar Association President Lisa C. Goodheart today announced that the BBA endorses Chapter 11 Bankruptcy Venue Reform Act of 2011, H.R. 2533. The Bill proposes changes to the current venue rules for commencing Chapter 11 bankruptcy cases in order to limit "forum-shopping."

In early September, Chief Judge Frank J. Bailey of the United States Bankruptcy Court for the District of Massachusetts, testified before Congress in support of the legislation. The bill was endorsed by the BBA's governing Council following a presentation by BBA Bankruptcy Section Co-Chairs John Morrier of Casner & Edwards and Doug Gooding of Choate Hall & Stewart.

"We are convinced that as a general matter, the consequences of a corporate bankruptcy are often most profound in the community in which the debtor's principal place of business is located," said BBA President Lisa C. Goodheart. "Requiring that a corporate bankruptcy take place locally ensures that the distinct needs of the most directly affected community are not overlooked or, worse, ignored by a group of professionals who live and work hundreds, if not thousands, of miles away."

Under current rules, companies with large operations and vast numbers of employees in Massachusetts are eligible to file their bankruptcy cases in either the Southern District of New York or the District of Delaware because they are either incorporated in those jurisdictions or follow affiliates which are eligible to file there. For example, Massachusetts-based Friendly's filed for bankruptcy protection in Delaware, on the same day that the company announced 30 restaurant/store closings in the Bay State -- resulting in a raft of layoffs and other impacts in Massachusetts.

The legislative proposal endorsed by the BBA would require a Chapter 11 debtor to file a bankruptcy petition in the district where either the debtor's principal place of business or principal assets are located. H.R. 2533 seeks to limit Chapter 11 filings in jurisdictions where a particular debtor has little or no presence.